Question

30 of 50

A decrease in the reserve ratio will

	cause the money supply to decrease.
	cause the money supply to increase.
	not affect the money supply.
	decrease the money multiplier.

Question

31 of 50

The term "depository institution" refers to

	commercial banks only.
	credit unions only.
	savings and loan associations only.
	commercial banks, credit unions, and savings and loan associations.

Question

32 of 50

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

	people were relatively unsophisticated in their financial transactions.
	gold was the major form of money.
	not all depositors would claim their gold at the same time.
	gold did not serve as a unit of account.

Question

33 of 50

The interest-rate-based approach to the monetary policy transmission mechanism says that a change in the money supply influences aggregate demand by

	a change in interest rates, which changes investment.
	a change in interest rates, which changes the money supply.
	changing consumer consumption behavior as they adjust to a change in the number of dollars available.
	leading to shifts of the short-run aggregate supply curve.

Question

34 of 50

By saying that the equation of exchange is an accounting identity, we mean that

	it is useful for accountants, but not for economists.
	it identifies the key national income accounts.
	it is always true.
	it explains the effect of questionable accounting practices on macroeconomic performance.

Question

35 of 50

When the rate of interest in the economy increases

	the market price of existing bonds will fall.
	the transaction demand for money will increase.
	real Gross Domestic Product (GDP) will increase.
	the asset demand for money will increase.

Question

36 of 50

According to the quantity theory of money, an excess quantity of money supplied will lead to

	a reduction in spending and higher interest rates.
	a reduced level of real Gross Domestic Product (GDP).
	a higher level of employment.
	a higher price level.

Answer 1

30. Ans: cause the money supply to increase.

Explanation:

Decrease in reserve ratio means that banks are required to hold less reserves with FED. It allowing the banks to make more loans to consumers and businesses. This will lead to increase in the money supply in the economy.

31. Ans: commercial banks, credit unions, and savings and loan associations.

32. Ans: not all depositors would claim their gold at the same time.

Explanation:

All people, who deposited gold with goldsmith, would nor want to take back their deposit at a time. If one people ask for his or her deposit back, the goldsmith can give his or deposit from others deposit.

33. Ans: a change in interest rates, which changes investment.